Second act of Macron’s presidency: A final sprint to 2022 © BRUNSWICK GROUP 2020 | 1 After disastrous results for his Rather satisfactory party in the mid-term local economic results but social discontent elections, President Macron The election of Emmanuel Macron as President reshuffles his government and of France in 2017 shook French politics like an revises his priorities to deal earthquake: he was the youngest President in recent French history, had never been elected with the consequences of the before, and had never been member of a political party. His party's success in the legislative Covid-19 crisis and to start his elections that followed also led to the emergence 2022 re-election campaign. of a new generation of parliamentarians. Three years after his election, has this method of governing at the centre – alongside centre-right and centre-left personalities – borne fruit? Yes, but no. Yes, because, at the end of 2019, France's economic indicators were all pointing in the right direction: France had reached its lowest level of unemployment in 10 years (8.1%), seen a record number of newly created companies (815 257 , +17.9% in one year), generated the highest amount of foreign direct investments of any other EU country (according to an EY study), and its public deficit was at its lowest level in years (3% of GDP). Macron had also succeeded in pushing through long-awaited reforms, including a reform of the railway sector, a reform of labour legislation and a reform of the complex pension system, which has still to be finalised. Yet the country has never seemed so divided and Macron's presidency has been marked by large- scale social movements that have exposed the deep divisions of French society: the Yellow Vests in 2018, the union strikes against pension reform in 2019, and, most recently, large-scale anti-racist demonstrations. The famous saying by Bill Clinton's strategist, James Carville, "it's the economy, stupid", no longer seems to apply in France! “I believe that the course I set for the country in 2017 remains true. But this course I have set cannot ignore the international upheavals and the economic crisis we are entering.” President Macron © BRUNSWICK GROUP 2020 | 1 The pandemic gamechanger The election winners were the Greens, who conquered many large cities, including the After delays in taking adequate measures at the symbolical Lyon, Marseille, and Strasbourg – beginning of the Covid-19 pandemic and a often with candidates with no political experience blatant lack of preparation, the French - while being instrumental in the coalition that government has managed to limit the spread of allowed the socialist Mayor of Paris, Anne the pandemic, at least for the time being, thanks Hidalgo, to be re-elected. to strict containment measures. But the crisis has revealed France's problems, particularly those In a typical move, and in order to take stock of linked to deindustrialisation, and the generous this electoral failure, President Macron decided to support measures designed to limit the impact of speed up his government reshuffle, which the crisis on French companies have been made everyone was expecting for later this summer. at the expense of a widening public deficit. In that context, Macron needed to give a second wind to his presidential term and renew his government team, largely "worn out" by the last An experienced new team few months and repeated blunders. He also The first to go was Prime Minister Edouard needs to adapt his priorities to the post-Covid-19 Philippe – although re-elected mayor in his world and prepare the final sprint for his possible fiefdom of Le Havre, and still popular, maybe too re-election in 2022. Paradoxically, it was his first much so… political setback that created this opportunity for him. The new Prime Minister, Jean Castex, a high-ranking French civil servant with a An opportunity to make for centre-right background, has significant several changes experience on social issues and labour relations - which will be essential in this The municipal elections, which were presented as context - as he served as chief of staff of the key mid-term elections in Macron's mandate, President Sarkozy’s Health Minister and took place on March 15th (first round) and June th then Labour Minister, before becoming his 28 (second round), with the lockdown in the adviser in charge of social issues. Castex middle. These elections, usually characterised by also has great local experience as a small- a high turnout, were marked by a record town mayor and councillor in the South abstention rate (55%) and a bitter failure for West of France for many years. A scholar Macron's young party, La République en marche, of the French administration, he was, until whose campaign had been poisoned by a sex his appointment, in charge of the scandal which forced candidate Benjamin organisation of the 2024 Paris Olympic Griveaux in Paris to withdraw, but also numerous Games, and more recently of the country’s dissidents. As a result, the party scored very poorly, winning very few local council seats and deconfinement plan following the Covid- no major cities, despite local alliances with 19 lockdown. established local politicians. Macron thus failed to impose his party at the local level, which is This safe choice of a more technical and less essential in French politics. political Prime Minister can be interpreted as Macron’s will to remain the only centre of attention, which Philippe did not allow, and thus begin to prepare for his re-election. The rest of the government also confirmed Macron's willingness to play it safe, keeping the best of his previous government and appointing experienced personalities to replace the others, with no overly strong political figures likely to © BRUNSWICK GROUP 2020 | 2 overshadow him. In particular, the few newly appointed centre-left personalities will have the “With this epidemic, the global economy heavy task of embodying this "social and green has come to a virtual standstill. Our first shift" and getting rid of Macron's image as priority will be to rebuild an economy that “President of the rich”. is strong, ecological, sovereign and united.” Among the newcomers are ecologist Barbara President Macron Pompilli (in the strategic position of Ecological Transition Minister) and former socialist Brigitte Bourguignon (Autonomy Minister), but also As expected, the environment is one of them, as centre-right personalities such as Sarkozy's Macron must address the wishes of the French former minister Roselyne Bachelot (Culture expressed during the municipals and, before Minister), as well as figures from the civil society, them, the European elections of 2019. To do so, such as lawyer Eric Dupond-Moretti (Justice he capitalised on the work of the Citizens' Minister) and Alain Griset (SMEs Minister). Convention on Climate Change - composed of 150 citizens drawn at random with the mission to Several significant ministers were maintained in make a series of environmentally related their positions, such as Jean-Yves Le Drian proposals that would be socially acceptable- (Foreign Minister), Bruno Le Maire (Economy which he himself had set up as a response to the Minister with a beefed up portfolio), Florence Yellow Vests movement. Immediately after the Parly (Armed Forces Minister), Olivier Véran municipal elections, Macron himself announced (Health Minister), Frédérique Vidal (Research and that he would endorse the vast majority of the Innovation Minister) and Jean-Baptiste Djebarri 150 proposals tabled by this group in a new law (Transports Minister). to be introduced in Parliament by the end of the Rising stars were promoted, like Gérald Darmanin summer. These proposals most notably include (Interior Minister), Julien Denormandie the organization of a referendum to introduce (Agriculture and Food Minister) and Agnès the fight against climate change into the French Pannier-Runacher (Industry Minister) or simply Constitution, and the creation of the crime of switched portfolios, like Elisabeth Borne (Labour “ecocide” into French criminal law. Minister) and Franck Riester (Foreign Trade This "social and green turn" reflects Macron's Minister). desire to secure the support of moderate left- Junior Ministers are expected to be appointed in wing voters (some will say "Blairists"), who the coming days. contributed to his success in 2017 but who may have been disappointed by his overly free-market policies of the past three years. However, the shortcomings revealed by the Covid-19 crisis on France's food, health and technological independence are also creating new priorities. And obviously, the French government will not be able to avoid major structural reforms in the face of a ballooning public deficit resulting from the business support measures and multiple sectoral recovery plans announced in recent weeks. Environment and social as Public spending to maintain the economy new political priorities includes: €15 billion for the aeronautics sector, €8 billion for the automotive Macron’s new political priorities will be detailed sector, €18 billion for the tourism sector, during his speech on Bastille Day and later on by with a public deficit forecast at 11.4% of the Prime Minister in his first address to GDP in 2020. Parliament, but some of them are already obvious. © BRUNSWICK GROUP 2020 | 3 Will France remain a business- more than two years of negotiations with the trade unions and 6 months of protests and friendly destination? blockades, and the rebalancing of powers Over the past few years, President Macron and between the central state and local authorities. his government have worked to create a business-friendly environment in France, most notably with the reduction of the corporate tax What to expect in 2022? for large companies with a turnover of more than Despite these many challenges, so far, no €250 million (from 33.3% in 2019 to 31% in 2020, opposition party is succeeding in capturing the then 27.5% in 2021 and finally 25% in 2022).